Is precision agriculture the new low hanging fruit?

In the world of agriculture, ‘precision ag’ is hot. Precision agriculture is a farm and site specific management system to optimize inputs and outputs. Essentially, farmers use GPS, sensors and big data analytics to better understand and adjust for spatial variability in their fields such as yields, moisture levels, soil variability, etc. Rather than treating the farm as a monolith, the idea is to break it down into smaller sites and customize agronomy to each site accordingly.

WSJ graph on precision agMonsanto recently announced big initiatives in the space, including the launch of FieldScripts (software), the $250M purchase of Precision Planting (hardware), the $1BN purchase of Climate Corporation (data analysis) and the acquisition of the soil analysis business line of Solum, Inc.  The company says that precision planting, based on detailed analysis of soil and land conditions, can improve corn yields by 10 bushels per acre. Monsanto isn’t alone in embracing precision ag. John Deere, Syngenta, CNH, Dupont and others have also been pushing the technology. Not surprisingly, the venture guys are following suit with a number of investments in the space.

If you want to understand why, just read last week’s Wall Street Journal article that estimates that 41 million acres of corn seeds were planted in 1 week last year (twice the max rate in 2008). GPS software attached to tractors allows farmers to plant more precisely and to plant at night. Planting faster is important because farmers can identify ideal planting windows and optimize for weather.

precision ag chart

Source: http://lb.landw.uni-halle.de/publikationen/pf/pf_cc98.htm

Over the past 100 years, the agriculture industry has pursued a variety of means to increase yields. These “low-hanging fruit” innovations include new irrigation techniques, mechanically powered tractors, biotech crops, fertilizers and higher density plantings. Precision agriculture is next. Just in time too. According to the US EPA, “some 3,000 acres of productive farmland are lost to development each day in this country.” That’s more than 1 million acres lost every year, an area the size of Delaware.

Sample1_20100709_NDVI-1024x653

Precision ag also holds another promise: countering climate change. For example, it has the potential to curb overuse in fertilizers. A report released last month by California Environmental Associates argues that countries like China use too much fertilizer. Using precision ag technologies, farmers in China could reduce fertilizer use by 30%-60% without harming yields.

Data management tools give farmers more choices to measurably improve nitrogen use efficiency and greenhouse gas emissions. Just last week, Smithfield Foods and Environmental Defense Fund teamed up to help farmers optimize fertilizer application. EDF estimates that this collaboration will reduce excess nitrogen fertilizer on more than 450,000 acres and reduce GHG emissions from agriculture by more than 60,000 tons. Not bad.

Despite these possibilities, precision agriculture needs to overcome a number of challenges in order to reach its full potential. At a recent Agri-Tech Summit hosted by Sidley Austin LLP, Dr. Ted Crosbie (Monsanto’s Integrated Farming Systems Lead) described some of these challenges. For example, on any given field, soil can materially vary every 150 feet! That’s a lot of data that needs to be collected and analyzed. In addition, there are concerns about the privacy of farmer data; namely who owns it and who can use it.

Still, like the innovation that came before it, precision agriculture holds enormous possibilities for how we grow food and further optimize farming inputs and outputs. Hopefully investment in this space will bring the costs down so farmers around the world can reap the benefits.

By: Sudhir Rani
CFO of TerViva, Inc.

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